Müge Adalet McGowan, OECD
Patrizio Sicari, OECD
OECD Economic Surveys: Ireland 2025
Abstract
Housing affordability and availability continue to fall short in Ireland, which affects both the well-being of certain segments of society and the economy’s competitiveness. Recent policies have increased housing completions, but continued imbalances between housing supply and demand reflect structural impediments to a well-functioning housing market. Given the dynamism of the Irish economy and growing population, regular updates of housing needs are needed. Higher tax rates on residential dwellings and land can support tax neutrality, by reducing homeownership bias, while strengthening incentives to develop land and build. Improving the data framework and digitisation of the planning process, and recruiting a sufficient supply of skilled planners, including at the local level, should complement the new Planning and Development Act. Reforms to increase housing density, ensure land-use regulations meet housing needs, and lower costs and improve productivity in the construction sector are key to boosting housing supply. Reducing the complexity and restrictiveness of rent legislation and providing greater certainty for investors would help increase rental housing supply. Ensuring adequate supply and funding for the construction and operation of social housing is crucial to improve living conditions for the most vulnerable.
In a context of strong demand, past under-investment, and constrained supply, mainly driven by high costs and low productivity in the construction sector, delays in the planning and permission processes and inefficient land-use, house prices in Ireland have increased significantly after the global financial crisis and affordability and availability challenges have emerged. Continued imbalances between housing supply and demand risk further exacerbating affordability, with societal and distributional implications for individuals. There are also aggregate consequences on the competitiveness of the Irish economy, as the lack of sufficient housing, at affordable prices and in locations close to economic activity, is affecting employers’ ability to attract labour and their decision on where to grow and invest. Hence, the government has prioritised housing policies, notably within the 2021 Housing for All Plan.
Housing construction fell far behind population growth in the wake of the global financial crisis
Ireland’s housing stock is relatively recent in international perspective, with only around one-third of existing dwellings built before 1970 (Figure 4.1, Panel A). Single houses made up 42% of all dwellings in 2022, while apartments and flats, typically preferred by younger and more professionally mobile individuals, accounted for 14% of all housing (CSO, 2023), the lowest share among EU countries and well below the OECD average of above 40% (OECD, 2022a). Hence, the housing stock is not perfectly suited to accommodate the flexibility needed to meet an increasing demand for housing, due to population growth and the rising number of single-person households, particularly in urban areas.
Source: European Commission, EU Building Stock Observatory database; and Eurostat, Housing Conditions database.
Home ownership rates have declined from the 2004 peak of 82% to 69% in 2023 (Figure 4.1, Panel B). They vary by region and household characteristics, with significantly lower rates in larger cities and among lower-income households (both below 50%), and a high share of outright owners older than 65 (84%), who largely fall in the lowest income quintiles (Disch and Slaymaker, 2023). Combined with high transaction costs, home ownership can limit residential and labour mobility (Causa and Pichelmann, 2020) by making moving more expensive than renting. It can therefore also affect transitions from unemployment to employment and exacerbate skills mismatches or regional disparities (Blanchflower et al., 2013). Even so, there are concerns that those who prefer to be homeowners are not able to do so in Ireland.
The market-price rental sector is relatively undersized. Well-functioning private rental sectors ensure greater variety in housing services. For instance, they are better placed to meet the demand for flexible accommodation coming from newly formed households, lone parents, ‘digital’ self-employed and students, or to provide adequate opportunities to households with incomes only slightly above social housing eligibility thresholds. Overall, Ireland’s tenants account for about 30% of the population, which is around the EU average. Of these, 61% pay reduced rents to local authorities or approved housing bodies on properties the latter own outright or on which they lease, under certain conditions, from private landlords. Hence, only less than 12% of Ireland’s population had secured housing based on market rents, which is the second lowest share in the European Union (excluding Eastern European countries).
After the global financial crisis, housing investment did not keep up with the pace of population growth. In contrast to trends in the average EU and OECD countries, the number of dwellings per 1 000 inhabitants decreased from 436 in 2011 to 416.5 in 2022, which is relatively low (Figure 4.2, Panel A). This reflects a long spell of underinvestment in housing, while population continued to grow (Panel B). While more than 550 000 people were added to the resident population between 2011 and 2022, the overall pool of residential dwellings expanded only by 117 000 units, as new housing permissions and completions slumped in the wake of the global financial crisis (Panels C-D). The rebound in housing supply from 2014, driven by the strong economic recovery, stalled with the pandemic, but the number of dwelling completions, especially flats and apartments, has been increasing again recently, supported by the Housing for All Plan.
1. Changes relative to previous census.
2. The measurement refers to the end of period (for example, 1996 for the 1991-96 period).
Source: OECD, Affordable Housing database; and Central Statistics Office.
Large housing demand-supply imbalances triggered affordability challenges
The decoupling of housing stock dynamics from population growth led to marked pressures on house prices. Given the constrained supply, when household incomes started rising in 2013-14 with the strong economic recovery, the increased demand for housing – in a low interest rate environment – led to a marked upward correction in real house prices (Figure 4.3, Panel A). Real house prices grew at an average annual rate of 5.5% over the 2013-23 period, one of the fastest paces in the OECD, and above the rate of household disposable income growth (Panels B-C), triggering affordability concerns.
Significant price tensions also emerged in the private rental market, with real rents paid by tenants for their main residence increasing at an average annual rate of 4.6% over 2013-23 (Panel D). The rental market also faces challenges from low volumes of available properties according to non-official sources, but changes in official reporting requirements hinder comparisons across time (see below). The affordability of private rentals deteriorated, particularly for younger and lower-income households in the post-pandemic period, which reduced the scope for worker and student mobility (DHLGH, 2023a). In this context, public support for social housing, including housing assistance payments, has increased considerably, reducing the share of low-income households in the cohort of market-price private renters (Disch and Slaymaker, 2023).
Note: Panel A: nominal house prices deflated by the private consumption deflator. Panel C: nominal house prices divided by nominal disposable income (household disposable income after taxes and transfers divided by population), per person. Panel D: rental payments for main residence, deflated by the overall HICP index; actual rentals do not include imputed rents.
Source: OECD, Analytical House Price Indicators; and Eurostat, Monthly Harmonised Index of Consumer Prices.
Rising house and rent prices have exacerbated long-standing affordability issues, which can lower well-being and competitiveness. Housing-related costs at 26% of household final consumption expenditure in 2023 exceed the OECD average (Figure 4.4, Panel A). The share of private renters spending more than 40% of their disposable income on total housing costs is around the OECD average, but generous public support limits the affordability challenges for those on subsidised rents (Panel B). High housing costs are also among the main determinants of housing exclusion across the OECD (Baptista and Marlier, 2019; Horowitz et al., 2023; OECD, 2021a). In addition, the extent of homelessness has been growing (mostly in the Dublin area; Panel C), with the estimated number of homeless people reaching a record-high of 0.25% of the population at end-2023 (DHLGH, 2023b).
Note: For further methodological information on Panels B and C, refer to HC 1.2.3. and HC 3.1.4 in the Housing conditions indicators. In Panel B, private households include those receiving housing allowances for rents paid to private landlords.
Source: OECD National Accounts Statistics; and OECD Affordable Housing database.
There is also some evidence of misaligned resource allocation in the housing sector. As they are more likely to be in temporary or low-paid permanent jobs, younger workers tend to find it harder to afford a mortgage or outright homeownership (Cournède and Plouin, 2022). Indeed, given the underdeveloped private rental market, Ireland has a relatively high share of young adults living with their parents (Figure 4.5, Panel A). At the same time, many people live in homes that may be too large for their needs, with the highest rate of housing under-occupation in Europe (Panel B), suggesting that the national housing stock is not being used in an efficient manner (Housing Europe, 2023). Hence, the market-price rental sector’s capacity to offer the flexibility required by an expanding and diversified demand for housing appears hampered, which can undermine the credibility of broader affordability and mobility policy goals as well as Ireland’s ability to attract foreign capital and talent.
Note: A dwelling is defined as under-occupied if the household living in it has at its disposal more than the minimum number of rooms considered adequate for its needs.
Source: Eurostat, EU-SILC database.
The Housing for All Plan is progressing
The government launched the Housing for All Plan in September 2021 to address housing market challenges, with a target of adding around 300 000 homes by 2030 (170 000 homes for the private market, 90 000 social housing units, 18 000 cost rental properties -- a new form of affordable housing (Box 4.1), and 36 000 affordable purchase units). While private sources provided 82% of development finance to deliver around 30 000 houses in 2022 (Government of Ireland, 2024a), significant public funding has also been allocated (around EUR 4 billion a year until 2030), with an overall financing of EUR 12 billion in direct Exchequer funding, EUR 3.5 billion through the Land Development Agency and EUR 5 billion through the Housing Finance Agency. The Plan aims to increase the delivery of affordable homes to either purchase or rent at subsidised prices and social housing, simplify planning legislation, increase funding for land acquisitions and infrastructure spending by local authorities, introduce urban development zones and activate vacant land for residential purposes (Box 4.1). In addition, Ireland has ambitious targets to improve the energy efficiency of buildings (Chapter 3).
The Housing for All Plan, launched in September 2021, had an initial target of adding 33 000 homes per year on average until 2030, updated to an average of 50 500 per year in November 2024. It has four pathways with many policies, some of which are summarised below and in Table 4.1 and throughout the chapter:
Supporting homeownership and increasing affordability: this pathway will enable the implementation of the Affordable Housing Act 2021 to support people on low to moderate incomes in purchasing their first home through a local authority-led affordable purchase scheme and a first-home affordable purchase shared-equity scheme. It also introduces a new form of rental tenure (cost rental), where rent is based on the cost of provision rather than profit maximisation, and a new guarantee to enable local authorities to restrict a minimum proportion of homes in a new development to owner-occupiers, increases the mandatory allocation of newly-built developments to social housing, and plans a reform of the private rental sector.
Eradicating homelessness, increasing social housing delivery and supporting social inclusion: the policies include introducing targets for social housing by local authorities, increasing funding for approved housing bodies and use of public private partnerships to deliver social housing in cities, and strengthening the Mortgage to Rent Scheme to meet the needs of those in long-term mortgage arrears. The expansion of the Housing First Scheme aims to provide long-term, unconditional housing solutions to people experiencing homelessness with high service needs.
Increasing new housing supply: the policies will concentrate on increasing land availability for housing (provision of state land to the Land Development Agency, a new system of land value sharing), boosting the efficiency of the planning and judicial review processes, improving productivity of the construction sector and addressing labour shortages.
Addressing vacancy and efficient use of existing support: the main initiatives include the introduction of a vacant property tax and requirement for short-term and holiday-lets to register with Failte Ireland, and several schemes to bring vacant homes on the market for sale or rentals.
The Housing for All Plan has been progressing in terms of policies and outcomes. Around 95 000 dwellings were completed between the third quarters of 2021 and 2024 and around 1 000 cost rentals were made available in 2023 (Government of Ireland, 2024b). Resources provided to local authorities to boost affordable housing have increased. Several schemes have been implemented to have construction on state land, increase the viability of apartments and improve productivity in the construction sector (Government of Ireland, 2024a). Most notably, the Planning and Development Act was enacted in October 2024 to reduce planning delays (see below). In addition, quarterly progress reports and the use of performance metrics to monitor progress improve transparency and accountability.
The Housing Commission’s May 2024 report takes a long-term strategic view and sets out recommendations for creating a more sustainable housing system (Housing Commission, 2024). The report highlights that Ireland’s housing deficit needs to be addressed through emergency action, including by establishing a time-limited Housing Delivery Oversight Executive to oversee the delivery of housing and associated infrastructure. The 83 recommendations cover themes such as increasing housing supply, and creating an appropriate housing composition (private rented, social housing, first-time buyers etc.) in an environmentally-friendly and inclusive way, which depends on effective coordination of the planning system, land availability, infrastructure development and finance. The Commission was also tasked with and submitted a report with proposed wording for a potential referendum on housing.
The political economy of housing can be challenging, as some ineffective and cost-inefficient policies tend to be popular, protecting certain segments of society or stakeholders (Hilber and Shoni, 2022). In addition, time lags in outcomes associated with some policies seeking to boost housing supply can create pressures for short-term demand-side policies that can lower long-run supply, with potentially undesirable distributional effects. Given the growing size of the public sector in the housing market, the large number of schemes and the frequency of policy changes, monitoring and evaluation to create an efficient framework for investment certainty will be key to facilitate a faster housing supply response.
Lack of affordable housing can constrain competitiveness
Ireland’s economic model is based on its capacity to attract internationally mobile foreign-owned businesses and labour, and the potential spillovers to boost the performance of domestic SMEs. Multinational-dominated sectors currently account for about 45% of Ireland’s gross value added, around 14% of total employment and a sizeable share of tax revenues. Despite a competitive starting position, Ireland faces significant challenges to securing its attractiveness as a location for foreign direct investment (FDI) and talent into the medium to long term, such as infrastructure deficits (NCPC, 2024a; IDA, 2024). Housing gaps can also impact firm costs directly through wages and indirectly through the price of Irish goods and services (NCPC, 2024b and 2023; NCC,2016) and constrain labour mobility. Indeed, prolonging the imbalance between housing demand and supply increases the cost of living, and in turn the cost of doing business, ultimately damaging competitiveness over the medium term (CBI, 2024). Such effects should be a strong focus in the design of long-term housing policies.
Housing pressures are highest in cities (Figure 4.6, Panel A), with rents in Dublin high in an international perspective (Panel B). FDI in Ireland is concentrated in several urban centres (services in Dublin, pharmaceuticals in Cork and medical device manufacturing in Galway). Hence, high housing costs are becoming a barrier to the recruitment of international staff for multinational enterprises (MNEs) (Committee on Budget Oversight, 2024; American Chamber of Commerce, 2024; IBEC, 2023). In addition, more transient workforces, such as those in many ICT companies in Dublin and other cities, require smaller, centrally located accommodation. Hence, it will be important to improve the supply and affordability of appropriate housing, i.e. smaller housing units or apartments in urban centres, by lowering construction costs and boosting brownfield investment (see below).
Note: Panel A: The housing cost overburden rate is the percentage of the population living in households where total housing costs ('net' of housing allowances) represent more than 40 % of disposable income ('net' of housing allowances). For homeowners, the housing cost calculation includes mortgage interest payments net of any tax relief, and gross of housing benefits. For tenants, the calculation includes rental payments gross of housing benefits.
Source: Eurostat; and International Service for Remunerations and Pensions (2023), 2023 Current Market Rents.
There are also concerns that the domestic economy and the public sector are unable to retain staff (ex. nurses, teachers), especially in big cities (INMO, 2023). Private companies have become landlords to provide rental accommodation for their employees (Business Insider, 2024), while some hospitals are considering similar options (Irish Times, 2023). The need for MNEs to do likewise reduces the relative attractiveness of Ireland as an investment location.
Rising house prices can also shift the balance of labour market adjustment from employment to wages (Duffy, Fitzgerald and Kearney, 2005). High rents can lead to higher wage demands, lowering competitiveness as labour costs are around 61% of total expenditures for MNEs in Ireland (IDA, 2024). Lack of affordable housing can also limit economic opportunities linked to residential mobility and contribute to labour shortages (OECD, 2022b; Causa, et al., 2021). International evidence suggests that housing affordability constraints can distort locational patterns, leading to spatial misallocation (Maclennan, Ong and Wood, 2015), by reducing labour mobility towards more developed, productive regions, lowering productivity growth (Gholipour et al., 2023; Mclennan et al., 2019). Furthermore, instead of increasing local employment, productivity growth in housing-constrained cities primarily pushes up house prices and nominal wages (Hsieh and Moretti, 2015). Given these long-term potential adverse effects, housing policies should take a long-term view, based on sound data and cost-benefit analysis.
Meeting high housing investment needs requires policy certainty
Housing finance comes from a variety of sources. Public spending on housing as a share of national income is high (Figure 4.7, Panel A). In 2022, around 30 000 new homes were developed. Excluding the funding for 5 000 self-build homes financed from a combination of mortgage finance and the homeowner’s equity, development finance (debt and equity) for the remaining houses was EUR 9.6 billion, of which 82% was from private sources (Department of Finance, 2024). The sources of debt finance (EUR 5.4 billion) were split between secondary lenders and alternative debt funds (43%), domestic banks (28%), international banks (4%) and the state (25%). The state provided only 9% of the equity finance (EUR 2.4 billion), with the rest sourced from international equity providers (61%), and domestic equity providers and developers’ own equity (30%).
Note: Panel A: Public spending refers to spending on housing development, excluding community amenities, and social protection spending on housing. “Other” refers to other spending, such as compensation of employees, intermediate consumption, and acquisitions less disposals of valuables.
Source: OECD, Annual Government Expenditures by Function database; and Department of Finance (2024), Report on the Availability, Composition and Flow of Finance for Residential Development.
While overall access to finance for residential development for viable projects is not a major issue, despite higher interest rates and costs, pockets of challenges remain (Department of Finance, 2024). First, land which is zoned but does not have planning permission faces funding challenges due to uncertainty, highlighting the importance of an efficient planning process. Second, new apartment development without a committed purchase from the state can also face funding gaps, as high development costs have driven up the yields required. International investors (private equity funds, sovereign wealth funds, etc.) tend to focus their financing on higher density apartments in centrally-located areas (Department of Finance, 2019). Indeed, the institutionally-owned share of the Dublin private rental stock has risen from 6% in 2016 to 17% in 2022 (Daly, 2023). Hence, attracting such investment in the Irish housing market, which faces competition from other global assets, whose yields have been increasing, will be key. Finally, projects which require significant infrastructure development can have difficulty obtaining funding (see below).
Projected residential development finance needs from the private sector to meet higher housing targets are high (Figure 4.7, Panel B). Most stakeholders highlight the importance of long-term consistency and a stable and predictable policy regime for private investment. Indeed, repeated large-scale changes to the fiscal and regulatory framework might lower the attractiveness of Ireland for long-term investment capital for housing (KPMG, 2022). Hence, all policy, legislative, and regulatory proposals should be subject to rigorous regulatory impact and cost-benefit assessment, which requires granular data to assess and monitor trends. Ex-post evaluation, given that some policies can be expensive and may not always be effective in delivering results, is also crucial.
Water and electricity infrastructure is important to attract capital and meet housing targets (NCPC, 2024c; Housing Commission, 2024; Department of Finance, 2024). Uisce Éireann, the water utility provider, has warned that water shortages in Dublin are a major concern. Hence, long-term planning in infrastructure should be closely aligned with long-term housing policies, with close cooperation between the government, industry stakeholders and regulatory bodies. The establishment of a working group in December 2023, which includes the major utility and infrastructure providers, to align delivery programmes, is welcome. The planning reforms will help, but there is also room to improve the accuracy of both cost and time estimates in the capital programme of Uisce Éireann to meet targets (NCPC, 2023). Better delivery strategies through mature risk allocation, collaborative work, adoption of new technologies, apprenticeship schemes and graduate training programmes can grow supply chain capacity, maximise value and optimise the delivery of projects and programmes (Irish Academy of Engineering, 2023). While Ireland has improved its water governance, investment needs to update an ageing infrastructure and meet future demand are large. The current funding model is based on setting policy objectives and associated costs across different government departments, without household water charges, except for certain thresholds. The funding model for water services could be assessed to see whether it is sufficient to cover the high investment costs (OECD, 2021b).
Efforts to improve data consistency and policy evaluation should be continued
Linking of different databases and availability of consistent data could be improved through greater standardisation and coordination among data-collecting bodies. For example, different methodologies and samples deliver inconclusive results on the size of the private rental sector (CSO, 2024) and whether small private landlords are exiting the rental market (DHLGH, 2024a; RTB, 2023). Data limitations can also cloud the assessment of the extent of the role of the state in the housing market. The publication of reliable and consistent nationwide estimates of the number of accommodations provided by local authority and approved housing bodies, whose balance sheets constitute part of general government debt, can be improved. Official estimates of the cost of maintaining and managing local authority housing are no longer published (Doolan, Roantree and Slaymaker, 2022). A better understanding of the current status can help guide the design of an extensive reform of the social housing sector (see below), as recommended by the Housing Commission.
As policies to boost supply can take time to deliver results, demand side measures to improve access to finance for first-time buyers (First Home) and tax refunds (Help-to-Buy) have been introduced. Such measures in a context of supply-demand imbalances can contribute to demand pressures and translate to higher house prices or rents over the medium term, and be costly and hard to reverse. While the schemes have increased access to homeownership for some, several reviews have highlighted their increasing fiscal costs and their regressive nature (Department of Finance, 2022a and 2021: Parliamentary Budget Office, 2022), but the Help-to-Buy scheme has been extended to 2029 in Budget 2025. Such schemes should be kept narrowly targeted and limited in size, as recommended in the 2022 OECD Economic Survey. Close and regular monitoring of these demand-based measures will be crucial so that they can be quickly adjusted if any inflationary pressures arise.
An accurate assessment of housing needs is crucial for policy design
Ireland will require one of the largest increases in the housing stock between 2020 and 2050 in the OECD at 40 percentage points (Cournède, Ziemann and De Pace, 2020). The initial housing targets of 33 000 per year in Housing for All were based on Census 2016 (Bergin and Garcia-Rodriguez, 2020) and did not fully take into account pent-up demand from the property bust era or a change in household size over time, by design. At the time, alternative assumptions on population increases, household size and/or obsolescence implied a need for around 50 000 units per year (Lyons, 2021; Conefrey and Staunton, 2019). Hence, it is welcome that the government revised targets for the 2025-30 period to 303 000 new homes by 2030, with an average of 50 500 per year rising to an annual delivery of 60 000 by 2030 (Government of Ireland, 2024c). These estimates are based on demographic and econometric modelling using Census 2022 in Bergin and Egan (2024), and include different scenarios of migration, obsolescence and household size.
As estimations of housing needs based on assumptions on future population growth or average household size can be subject to uncertainty, they should be revisited periodically, in light of incoming data, especially to the extent that such estimates are then translated into targets for public policy. For example, net inward migration has often been underestimated in Ireland, which could be the case again as population growth since Census 2022 has already exceeded the annual average assumed in the “high migration” scenarios (Goodbody, 2024a). In addition, while the new scenarios around household size and obsolescence may indirectly account for some of the past housing deficit, other estimates of pent-up demand (e.g. Housing Commission, 2024) are much higher.
To apply national targets at the local level, each local authority prepares a Housing Need and Demand Assessment (HNDA), based on the Housing Supply Target methodology, for the next six years. In principle, this tool facilitates long-term planning and incorporates modelling based on population projections, age structures, tenure types and affordability considerations. The government is undertaking work to translate the new national target into targets broken down by tenure type.
Availability of fully serviced, residentially-zoned land in the correct locations is key to meet housing targets. The setting of local targets follows from the National Planning Framework’s regional balanced growth scenario, which could be underestimating the need in large urban areas, most notably in Dublin. For example, housing supply has been more responsive in commuter belts than in urban centres (Figure 4.8, Panel A). Dublin does not have adequate volumes of zoned land relative to its population, while the Mid-East region has an excess. The data to assess this across the country are incomplete, but recent analysis based on data created for the introduction of a residential zoned land tax shows that the distribution of zoned land does not match the distribution of demand (Panel B; CBI, 2024).
Note: Panel A, annual completions by region divided by 2022 Census estimates of households in permanent dwellings (a proxy for the housing stock). Regions defined as follows: Dublin city given as Dublin City Council area separately. Dublin non-city (Fingal, DLR, South County); GDA (Meath, Kildare, Wicklow); Other urban (Galway, Cork, Limerick, Waterford).
Source: CBI (2024), Quarterly Bulletin, 2024Q3, Central Bank of Ireland.
The determination of local targets has not been sufficiently sensitive to regional economic and social contexts and its results have been inappropriately referenced to argue for a cap on housing development in some localities (Housing Commission, 2024). This can lead to undersupply as planning permissions do not always translate into home completions (Savills, 2022; AIB, 2022; Lyons, 2021) due to judicial reviews, viability challenges, and lack of infrastructure. Local authorities are allowed to make land available for housing 25% above that indicated by the Housing Supply Targets (HST) methodology. However, historically, only one in three or four units that get permission are built due to changing finance and viability issues, servicing and access challenges and planning objections via courts (KPMG, 2023). Some stakeholders have argued for a buffer of at least 40%, which should be higher in urban areas, where there is a larger proportion of brownfield sites (Goodbody, 2024a). Ongoing reviews of the framework for determining local targets are warranted, ensuring the outputs are appropriately implemented, while preventing them from being interpreted as ceilings on housing supply in particular areas. The HST results should be treated as minima, like in Scotland.
Reforming housing taxation to ensure greater neutrality across types of tenure
Receipts from property taxation are relatively modest. As of 2022, recurrent taxes on immovable property accounted for about 0.8% of GNI* and 1.9% of general government total tax receipts, below the OECD average (Figure 4.9), contributing to the reduced overall tax burden on housing. Like many other OECD countries, Ireland exempts tax-imputed rents and capital gains from main residence sales (Leodolter et al., 2022; Norregaard, 2013), increasing housing inequality between those who own a house and those who are renting (Kilgarriff et al., 2019).
Share of revenue from recurrent taxes on immovable property in general government tax revenues, %, 2022
Note: OECD unweighted average.
Source: OECD Revenue Statistics database.
Recent changes to the local property tax (LPT) have had a limited impact on its yield. Introduced in 2013, the functioning of the LPT was initially affected by delays in property revaluations. In 2021, a new reform reduced rates, expanded the base, and required taxpayers to update their self-assessed property valuations every four years. Additionally, previously exempt houses constructed since 2013 were brought into the scope of the tax (Irish Tax Institute, 2021). The reform was expected to increase the recurrent property tax burden for about a third of taxpayers, although LPT rates remain comparably low. To support lower-income households, the reform broadened eligibility to property tax deferrals and lowered the interest charged on deferred tax payments. The net effect of all these changes was a limited increase in nominal LPT revenues to EUR 500 million in 2022 (0.2% of GNI*), corresponding to a 4% decrease in real terms relative to 2019. In part, this stemmed from some local authorities’ attempts to protect their residents from the reforms’ net tax cost by exercising the option to reduce LPT basic rates.
The temporary mortgage interest relief scheme introduced in Budget 2024, two years after the end of the version launched after the 2008 housing bubble burst, was extended by one year in Budget 2025. The scheme grants homeowners who borrowed to purchase or retrofit their main residence a 20% tax credit on the extra interests paid in 2023, relative to the previous year, provided they are in compliance with planning regulations and interest and property tax payments. The relief scheme is not specifically targeted and applies on a relatively large range of outstanding mortgage balances (EUR 80 000 – EUR 500 000). While the measure was to help against higher interest rates, recent estimates show that a rebound in mortgage switching activity and new fixed-rate loans ensuring a rapid rebalancing, left only about one fifth of borrowers exposed to rises in interest repayments (Byrne et al., 2023; Chapter 1). In addition, mortgage-interest reliefs for owner-occupied housing tend to be regressive, while potentially leading to higher house prices (OECD, 2022c). Hence, the scheme should not be extended further.
Recent budgets also introduced tax incentives for landlords and tenants to improve affordability and increase rental supply. The ceiling for the rent tax credit for tenants was gradually increased from EUR 500 to EUR 1 000 in Budgets 2024 and 2025. While such measures aim to lower housing affordability challenges for middle-income renters, they are not targeted. Rental support for households should be provided through welfare measures based on income criteria and needs assessment rather than via untargeted tax incentives. As in other OECD countries, landlords are already eligible for tax deductions for various expenses against rental income for 100% of mortgage interest payments, repairs and maintenance and the cost of any property management fees or service charges. The additional temporary rental income tax relief of 20% to support private landlords from 2024 to 2027 is expected to reduce the tax on rental income up to EUR 600 in 2024, EUR 800 in 2025 and EUR 1000 in 2026, provided the landlord does not leave the rental market during the four years. Such tax reliefs tend to favour higher-income households, who are more likely to own rental properties, and can be distortionary (OECD, 2022c). Hence, the new incentives should be phased out and should not become a permanent policy tool.
Taxes, such as VAT for construction materials and development levies, account for around 16% of the cost of a typical new home, which has led to calls for waivers to reduce development costs. For example, a waiver for development levies was extended until the end of 2024, which can help in the short run. However, tax incentives during the property boom (e.g., tax deductions for mortgage interest payment, no taxes on property values, capital gains or imputed rents) created long-term negative externalities, including misallocation of housing, deadweight losses, and significant fiscal costs (Department of Finance, 2022b). The impact of such tax incentives on supply and prices are likely to be limited in the context of structural rigidities in the housing market (Barrett, Duffy and McQuinn, 2015). In line with the 2022 report of the Commission on Taxation and Welfare, tax expenditures and measures aimed at the short-term stimulation of construction activity should be avoided. If utilised, they should not be broad-based and without an expiration date.
The Vacant Homes Tax introduced in 2023 is set to increase. According to 2022 Census data, the total number of vacant dwellings decreased by about 20% since 2011, to 163 000 vacant homes (-29%) and 67 000 unoccupied holiday homes (+13%), although the vacancy rate’s variance across counties is high (Figure 4.10; CSO, 2023). The tax is levied on liveable dwellings that have been occupied for less than 30 days over 12 months, a threshold broadly in line with France's, but less generous than in England, where a charge is levied on houses left unoccupied for over two years. The tax rate was increased to five times the dwelling’s basic rate of local property tax, up from three times, and is set to rise to seven times with Budget 2025. Initial data on the tax returns revealed that out of 50 000 properties reported to revenue commissioners, for the period to November 2023, 5 000 were declared vacant, of which only 60% ended up liable (Department of Finance, 2023). This was in line with the modest revenues (EUR 3-4 million) expected by the government at the onset. Evidence from existing vacant home taxes, however, shows that their capacity to increase the stock of housing depends on extensive monitoring, compliance checks, and fine systems, which are all administratively costly (OECD, 2022d). The government should thus assess whether the measure’s largely signalling effect warrants an additional layer of complexity in the tax system, as well as whether the goal to bring more private housing in the market could be more effectively attained through land use control regulations.
Vacancy rates in 2022 and % population changes since the 2016 Census
Note: The vacancy rate is the proportion of vacant dwellings in all housing. The size of each circle shows the per cent increase in population over 2016-22, which varies from 5% in Donegal and Wexford counties to 14.4% in Longford county.
Source: Central Statistics Office.
Replacing the Vacant Site Levy, the Residential Zoned Land (RZL) tax will become operational in 2025, following the final approval of the draft zoning maps released in early 2024. The tax will charge owners of land zoned and serviced for residential purposes but lacking any building liable for the local property tax, at an annual rate of 3% of the self-assessed land’s market value. However, landowners with a genuine economic activity (e.g. farmers) on land liable to the tax will be provided with the opportunity to apply for its rezoning and be exempted from RZL tax liabilities in 2025, while the authorities will soon publish guidance to help planning authorities in dealing with such requests. Administered by revenue commissioners and imposing on landowners the burden of proving their land is not properly zoned or serviced, after having filed an amendment request to local authorities, the new tax should ensure greater operational efficiency. While the tax is broader in scope and administratively less costly, the applied rate is well below the 7% Vacant Site Levy (OECD, 2022d). The government could thus consider increasing the RZL tax rate. At the same time, at relatively low rates applied to self-evaluated values, the capacity of the tax to trigger additional housing by activating unused planning permissions on undeveloped land might be less than expected. Outstanding planning permissions far exceeding the number of housing completions could mask hoarding of land mainly in individual or family ownership, including via multiple – preventive – planning permissions on the same site, suggesting that many non-activated planning permissions are likely to be unviable (Sweeney, 2022).
A holistic approach to housing tax policies could pave the way for a more efficient and equitable housing market. To ensure a more neutral tax treatment across types of tenure, higher Residential Zoned Land taxes would weaken land hoarding and speculative incentives, boosting housing supply. Greater use of effective technologies to monitor self-assessed land and property values, combined with LPT rates and tighter conditions on local authorities’ ability to decrease basic LPT rates, can further enhance tax efficiency. Means-testing can prevent placing an excessive burden on house-rich but low-income households. Additional options to broaden the tax base in an equitable way could include capping the capital gains tax exemption on the sale of main residences and tightening the tax treatment of secondary homes (Commission on Taxation and Welfare, 2022), for instance by applying higher LPT rates than for primary residences, as is the case in Italy. To streamline the system, this can be accompanied by the removal of stamp duties, even though they are not too high in international comparison. Budget 2025 raised stamp duties on properties worth above EUR 1.5 million and on bulk purchases of at least 10 homes. Overall, higher taxes on immovable properties could improve the equity and efficiency of housing taxation, for example by lowering the homeownership bias and boosting residential mobility, which is currently mainly hampered by the lack of available housing.
Ensuring more effective and timely handling of planning applications
Effectively navigating through existing planning regulations became arduous over time, as the legal framework, anchored on the 2000 Planning and Development Act, was made increasingly complex by scores of successive amendments. As a result, in 2021, the government launched a comprehensive review of the national planning legislation involving extensive stakeholder engagement, whose conclusions informed the Planning and Development Act 2024.
The Act, which is the third largest in Ireland’s history at 906 pages, aims to streamline the system, burdened by a considerable backlog of pending proceedings, to make it more user-friendly, while enhancing its overall coherence through clearer and more consistent planning decisions across all tiers of administration. Roles and responsibilities of national, regional, and local planning actors are also more clearly outlined. In addition, the alignment of local planning cycles – currently at six years – with the 10-year census-data cycle and the lifespan of the National Development Plan (NDP) and the National Planning Framework (NPF), the two key documents guiding Ireland’s development policies, will make designing and implementing the latter more effective. At the same time, local authorities’ mandate to review their plan performance after five years will preserve some flexibility. The system’s governance is also overhauled through the adoption of National Planning Statements, i.e., government-approved guidelines and directives with which regional and local planning authorities are mandated to align, although some degree of flexibility is provided on implementation (DHLGH, 2023c). Moreover, the requirement for all planning documents to adhere to the planning statements will enable greater uniformity in planning strategies nationwide.
In a bid to enhance the operating efficiency of planning processes, An Bord Pleanála, the independent quasi-judicial statutory body determining appeals on planning decisions made by local authorities and deciding on direct applications, which are authorised in more complex cases, like for strategic infrastructure developments, will be restructured. The Act renames the institution as An Coimisiún Pleanála (Planning Commission) and subjects it to a clearer separation of quasi-judicial decision-making, governance, and corporate functions. Planning commissioners, operating under the oversight of a newly established chief planning officer, will be primarily responsible for decision-making on appeals and direct applications, which is expected to reduce procedural times and increase absorption of existing backlogs. The overall governance, setting strategic directions, and organisational oversight will pertain to the governing board, while a corporate unit, overseen by a chief executive officer ensuring accountability, will support all other functions and promote coordination across departments (Oireachtas, 2023). The new set-up is supported by an increase in human resources (see below).
Paving the way towards faster decision-making
Extending the adoption of statutory mandatory timelines to the Planning Commission’s decisions will increase certainty in planning consent processes, especially in the case of more complex infrastructure and housing projects. According to the new Act, standard planning applications will be determined by local planning authorities within eight weeks (12 weeks if requiring environmental assessments), in line with previous legislation. If no decision is made within these terms, and the applicant does not consent to extending the period, the application will be deemed to be refused and the applicant may appeal it to the Commission. For the first time, however, specific timelines will also apply to the Commission’s determinations, ranging from 18 weeks for appeals of locally refused planning permissions (26 weeks, if involving an environmental impact assessment report) to 48 weeks for more complex direct applications, e.g., those related to strategic infrastructure developments. This is welcome, but highlights the challenges the new body will face, considering An Bord Pleanála’s ongoing struggles in effectively tackling a rapid increase in its caseload of standard planning appeals (which made up 75% of all cases submitted to the body in 2022) since 2020 (Figure 4.11, Panel A). This has led to lengthier proceedings and a significant reduction in the number of appeals disposed of within 18 weeks (Panel B). The timelines, though, will be introduced on a phased basis, starting with longer ones for strategic infrastructure development.
1. Appeals arising from decisions by local planning authorities on applications for permission for the development of land.
2. Average number of weeks to decide planning appeals.
3. Computed relative to the statutory objective timeline of 18 weeks applying to standard planning appeals not involving an environmental impact assessment report.
Source: An Board Pleanála (2023), 2022 Annual Report and Accounts.
The increase in An Bord Pleanála’s caseload since 2019 occurred against the background of rising numbers of high court judicial reviews (Figure 4.12), partly driven by the side-effects of the Strategic Housing Development (SHD) scheme. Launched in 2017, the SHD scheme fast-tracked planning processes for the delivery of larger housing and student accommodation projects by allowing concerned developers to bypass local authorities and file their applications directly with An Bord Pleanála, whose decisions could only be challenged by judicial review (SHD Review Group, 2019). The move triggered a growing recourse to legal action, largely grounded on environmental objections. Moreover, decided cases were overwhelmingly ruled in favour of appellants. As of 2021, SHD-related high court judicial review orders accounted for one quarter of those of all non-asylum-related ones (Figure 4.12), which led the government to replace it with the Large Scale Residential Development scheme. The latter reinstated local authorities as primary planning decision-maker but made only limited changes to other SHD parameters (Office of the Planning Regulator, 2023). According to industry sources, out of the 150 000 housing units proposed under the SHD scheme, about 20 000 are awaiting decision from An Bord Pleanála, due to average processing times having mounted to 95 weeks (Planning Permission Ireland, 2024).
A system of proportionately escalating penalties is to be implemented to reduce the scope for procedural delays. In cases in which the Commission fails to decide within the described mandatory time limits and to agree with the applicant on a new term, the Commission will avail of three possible additional time extensions – up to a maximum of 10 weeks for standard planning applications. Further violations of these sequentially extended timelines, though, will expose the Commission to a suite of proportionately escalating penalties, which include notifying the delay in the decision – and its causes – on its website, penalty payments to the applicant, and, finally, informing the Minister, who may request a review of the Commission’s performance (Oireachtas, 2023).
Number of orders made by the High Court¹
1Data refer to the total number of orders made by the High Court with reference to judicial reviews unrelated to asylum applications.
2The SHD scheme aimed at fast-tracking the planning process to accelerate the approval of large-scale housing projects comprising 100 or more residential units or student accommodations with 200 or more beds.
Source: Courts Service, Annual Reports.
Provisions for penalties or compensation for undue delay in planning processes exist in other OECD countries, such as the United Kingdom and most North-European countries, although details vary with the specifics of the legal and administrative frameworks. Similarly, efficiency improvements in the Dutch planning system, resulting from the recent centralisation of planning applications in the Environment and Planning Portal (Government of the Netherlands, 2024), will be supported by existing rules providing citizens with the right to a periodic penalty payment for a public authority’s failure to take a timely decision (De Graaf et al., 2020). At the same time, concerns have emerged over the possibility that the imposition of penalty payments for delays in determining planning applications might result in rushed decision-making, opening the door to subsequent judicial reviews (Joint Committee on Housing, Local Government and Heritage, 2023). In this context, the full impact of the Act will only be seen over time, due to its complexity, while the process will remain open to potential hurdles. To better ‘enable’ the Act and ensure more streamlined and effective planning processes, the government should rapidly put in place the needed framework of secondary regulations and stand ready to flexibly adapt them, were evidence of misalignments with the Act’s objectives to emerge. Enhanced monitoring capacity will also be key. The Act’s requirement for the Commission to publish data on the number of appeals decided within the headline period and the additional ones (Oireachtas, 2023) is welcome, but the adoption of smart advanced digital monitoring systems – including AI-based – across proceedings, would increase procedural effectiveness.
Ensuring timely housing development while safeguarding judicial review rights
Frequent recourse to judicial review delays the delivery of larger housing developments. Although most standard planning applications are approved in reasonable times, complex infrastructure or housing development projects often trigger lengthy judicial reviews (Garcia et al., 2023). In addition to a tendency of third parties to resort to judicial reviews, such legal challenges partly result from a growing willingness of courts to intervene in detailed planning procedural issues (NCPC, 2023). This results from underlying tensions between the rules-based approach of EU directives on environmental matters and the Irish common law system, in which public participation in planning traditionally involves the right to challenge the authorities’ administrative decisions. Judicial reviews thus prolong the planning process, leading to increased costs and lower investment certainty. 2023 survey data pointed to residential developers identifying planning-related issues as the main obstacle to their activity, while 46% of them considered a judicial review would add at least 21 months to their proceedings (Knight Frank, 2023). Hence, the Planning and Development Act aims to provide a balanced solution on judicial reviews by reiterating citizens’ right to access justice for planning decisions affecting the environment, but also by better qualifying their standing rights to legal action to avoid potential abuses (Box 4.2).
The Planning Act preserves citizens’ right to access justice and review procedures on decision-making with respect to the environment. This includes a new scheme supporting eligible applicants in dealing with legal costs, combined with the introduction of a scale of fees to reduce their level, lower court times through the removal of the requirement for a preliminary assessment of applications, and procedural changes to qualify the standing rights of those seeking to take judicial review proceedings and speed up the process. Applications for judicial reviews will only be legitimate if the applicant is materially affected by the underlying matters and, except for a specified set of bodies, has already exhausted any other available legal and administrative alternative. Moreover, to curb the risk of additional delays, courts will be bound to only consider the merits of the grounds raised in the initial application for judicial review, with limited criteria to allow for subsequent amendments. Similarly, while the Act maintains the right of environmental NGOs and unincorporated residents’ associations to apply for judicial review regardless of how they are affected by the matter, it tightens the governance criteria they are to meet to do so.
Source: House of the Oireachtas (2023), Planning and Development Bill 2023, Explanatory Memorandum.
Following the recommendations of a 2022 review to strengthen procedures and restore public confidence, An Bord Pleanála has improved capacity and governance. Over 117 positions have been created since late 2021, bringing the body’s staff up to an all-time high of 250 in 2023. The governance framework was enhanced with the introduction of a new code of conduct in September 2023 and the appointment of a dedicated ethics officer. Similarly, the effectiveness of decision-making was improved through the recruitment of staff providing specific legal support and advice and the development of written decision-making procedures. In early 2023, against the background of a half-vacant ten-member Board, the government filled the vacancies with temporary assignments and expanded the Board to 15 members. This helped reduce the Board’s overall pending caseload by about one-third over 2023 (Office of the Planning Regulator, 2024). In 2024, a full-term chair and ten full-time board members were appointed via competitive processes and the maximum number of ordinary board members was temporarily raised to 17 to the end of 2024.
The adoption of digital tools, particularly to modernise the body’s case management system, which is largely paper-based, should be enhanced (Houses of the Oireachtas, 2023). Deeper data collection frameworks are also needed for more effective process monitoring. Furthermore, accelerating the national adoption of e-planning – originally foreseen by 2022 (The Journal, 2022), by building on the Local Government Management Agency’s pilot system, currently enabling 12 local authorities to manage their planning applications and proceedings online (LGMA, 2024), would help streamline the planning process. This would enable faster turnaround times for applications and decisions, reduced administrative costs, closer integration and collaboration with local planning authorities and other public institutions involved in planning and reduce applicants’ administrative burden, while ensuring a more user-friendly experience.
Effectively enhancing local authorities’ gatekeeping role
The complexity of the Planning and Development Act 2024 makes assessing its capacity to effectively streamline Ireland’s planning system challenging. Moreover, in Ireland’s common law-based system, different interpretations of the law by courts may set precedents that could potentially lead in directions not necessarily foreseen by the legislator. Amidst these uncertainties, the reform’s success will hinge on providing local planning offices with the resources, expertise and technologies needed to effectively exert their gatekeeping role to reduce the necessity for judicial review. Faced with increasingly complex environmental and legal frameworks requiring multi-disciplinary approaches, persistently under-resourced local planning authorities, especially within rural areas, may let their decision timelines expire on more complex applications to shift the burden on the authority responsible for appeals.
Staff recruitment has proven increasingly challenging for local planning authorities. Their powers and functions weakened in recent decades due to increased centralisation of the national planning system (Irish Planning Institute, 2022). Almost half of the country’s public planning authorities had a shortfall of staff in 2023, with around 90% of the declared vacancies in planning positions in local authorities (Irish Planning Institute, 2023). Moreover, 62% of public planning services declared they were faced with severe difficulties in both retaining and attracting new planners (Universum, 2023), with overly long application processes cited as a barrier to new entrants. An in-depth review of human resources in the 31 local authorities’ planning functions identified a shortfall of 541 staff, including non-planner positions in 2022 (Joint Committee on Housing, Local Government and Heritage, 2023). Filling that gap would involve a 35% increase in 2022 total staff levels (1 550), at an estimated annual fiscal cost of EUR 40 million.
To help scale up the resourcing of decentralised planning offices rapidly and sustainably, Budget 2024 included a EUR 8 million allocation earmarked to establish an additional 100 staff positions in local planning authorities in 2024 and to finance training for existing staff. A ministerial action plan, aimed at ensuring a sustainable pipeline of planning and related expertise, including through international recruiting initiatives, was published in October 2024. This is welcome but should be accompanied by efforts to promote the centralisation of legal, technical – especially in the field of environmental assessment – training, and data analysis planning support at regional or smaller inter-county scales. Such form of service support coordination could promote consistency and streamlined decision-making, while helping to facilitate compliance with national guidelines.
Under-resourcing may undermine local planning departments’ productivity. In the short term, serious difficulties in dealing with workloads, due to insufficient resources, weaken local institutions’ capacity to retain staff. In the longer term, such tensions might also lower human capital accumulation by existing staff. Indeed, newly hired planners cite concerns about lack of adequate mentorship by already overburdened senior staff, which limits their opportunities for learning and career progression, or of skill depletion, due to excessive turnover among mid-level planners (Irish Planning Institute, 2023). Enhanced provision of flexible and effectively tailored training modules across all staff levels will be essential. Key reform initiatives to enhance the efficiency of local land development planning are progressing. In 2023, a multi-year Learning and Development Strategy to support building of planning capacity in local authorities, via tailored training programmes, was published (LGMA, 2023).
The recent recruitment drive might require frontloading the supply of more tailored and structured training. The Learning and Development Strategy’s foundation-level training will be available to all staff and cover general skills on framework planning conditions. Intermediate and leadership training, covering the technical and strategic competencies required for middle-managers and senior planners, will be phased in from 2026. Although longer and organisationally more complex to activate, as their designing will involve the regulator, schools of planning, and tertiary-level institutions (LGMA, 2023), the authorities should consider frontloading the deployment of intermediate- and leadership-level training support. The establishment of fully-fledged academic programmes in areas in which skill shortages are more acute, e.g., spatial marine or environmental planning, coupled with communications campaigns promoting the appeal of the planning profession, would strengthen the industry’s pipeline of talent.
Increasing investment in sustainable compact housing development
The 2018-2040 National Planning Framework (NPF), the key strategic document for Ireland’s planning and development policies (Government of Ireland, 2018a), is currently being revised to make it consistent with a larger than expected population growth and new policy developments (Government of Ireland, 2024c). This revision was key to inform efficient land use and development across regional and local authorities to ensure regionally balanced growth, against the backdrop of census data showing population growth tilted to the East in 2016-22 (Government of Ireland, 2023a). Overall, the draft revised framework acknowledges metropolitan areas and large cities as catalysts for population and employment growth, while pursuing a development strategy of regional parity, in which the targeted growth of the Northern, Western and Southern regions will at least match that projected for the Eastern and Midland region.
The NPF identified efficient land use, especially within and close to the existing built-up footprint of cities and towns, as indispensable to ensure more regionally balanced population growth by 2040. Accordingly, the NPF set specific targets to ensure a greater role for compact urban growth, requiring for 50% of new housing growth in the country’s five largest cities (30% for other cities and towns) to occur within their built-up areas, i.e., via infill or brownfield development projects. The rationale for these targets is that existing urban settlements, whose structures resulted from past fragmented planning approaches, entail large capacities to sustainably accommodate a growing population (DHLGH, 2024b). Emphasis is therefore laid on prioritising the renewal of existing settlements and buildings to limit urban sprawl. This requires addressing viability challenges (see below), effectively implementing new planning guidelines to encourage compact growth and managing land use more efficiently.
Ensuring an effective implementation of new planning guidelines
New planning guidelines for sustainable residential development were introduced in early 2024 to support the desired pattern of regionally-balanced, city-centred, and compact development growth. They aim to provide decentralised planning authorities with the flexibility required to make plan-led decisions reflecting the circumstances of their areas, to foster more innovative housing solutions (DHLGH, 2024b). The guidelines acknowledge that all types of settlements, regardless of size, exhibit a recurring spatial pattern: a concentrated core surrounded by a series of adjacent rings with gradually decreasing densities of dwellings and activities as they extend outward. Hence, for each category of settlement size, they define different area types (centre, urban, suburban or edge location), based on each area’s average distance from the settlement’s core centre, key transport services or significant employment locations, and assign them specific residential target density ranges, measured as dwellings per hectare (Table 4.2).
The guidelines are designed as a key tool to boost brownfield- and infill-led compact housing development, while ensuring some flexibility to local authorities when they need to consider greenfield alternatives in suburban and edge areas, or rural villages, albeit within a plan-led context and under specific conditions (Box 4.3). Furthermore, while the guidelines introduced a general presumption against densities out of the recommended ranges, in some cases, planning authorities can deviate from them on a plan-led basis, after having motivated their decision (DHLGH, 2024b). This could be the case for urban developments with densities above 300 dwellings per hectare, in cities, or in peripheral sites in which developers are required to adjust to the smaller scale of surrounding properties, for example. To avoid loopholes, such exemptions should be adequately monitored, while local authorities could be incentivised to comply by making the respect of density ranges a key criterion to receive public financial support.
Dwellings per hectare
Note: Metropolitan towns and villages refer to settlements within metropolitan areas with population, respectively, above or below 1 500; key and large towns are towns out of Metropolitan areas with population usually above 5 000; regional growth centres are key urban areas outside of primary metropolitan areas and identified by the National Planning Framework for their significant population and economic growth (for example, Sligo and Dundalk); small and medium-sized towns have a population between 1 500 and 5 000; rural towns and villages have a population below 1 500. Information within brackets refers to maximum thresholds open for consideration by planning authorities.
Source: Minister of Housing, Local Government and Heritage (2023), “SEA of the Sustainable Residential Development and Compact Settlements Guidelines for Planning Authorities”, SEA Final Environmental Report.
The 2024 guidelines on sustainable residential development include horizontal planning principles, whose degree of cogency varies by settlement size and area type. For example, all settlements are recommended to strengthen their urban cores via adaptation, re-use or intensification of existing buildings, while protecting and enhancing their historic fabric, natural heritage, biodiversity and environmental quality. The five biggest cities are required to deliver brownfield and infill development – at suitable locations – within existing built-up areas, while smaller settlements are prompted to realise opportunities for incremental brownfield, backland, and infill development. Additionally, cities and towns with more than 1 500 inhabitants can develop greenfield urban extensions only if the identified suitable areas are served, or set to be served, by high-capacity public transport or are next in sequence to the urban core and can be integrated into existing built-up areas. Conversely, smaller towns and villages may provide limited low-density housing at their edges, if these areas can be integrated in the existing built-up area and serviced with adequate infrastructure.
Source: DHLGH (2024b) and Minister of Housing, Local Government and Heritage (2023).
Greater clarity on how to translate planning guidelines into practice is being pursued. To illustrate how plan-making and design processes can effectively adapt to the updated guidelines on residential development and compact settlements, the government committed to release a non-statutory Urban Design Manual, which will provide specific reference examples. The manual will build on the NPF’s key principles, in line with recently updated manuals for the reuse of existing buildings or to upgrade their energy efficiency (DHLGH, 2024c and 2023d). In light of the large sectoral implications of planning activities, and the ensuing elevated number of official documents providing guidelines and reference standards, the government should consider centralising key information in a single online repository, which would contribute to enhanced policy transparency and clarity.
To ensure a greater range of housing options, new standards aimed at boosting low-rise medium-density housing models in suitable places, as common in many European countries, are needed. Featuring integrated open spaces at multiple levels, these systems imply smaller plot sizes and narrower street and parking spaces, resulting in lower environmental footprints. The 2024 planning guidelines set new specific planning policy requirements, such as more flexible minimum separation distances between opposing windows, higher standards for open private spaces and lower car-parking provisions, easing previous standards to facilitate sustainable compact growth (DHLGH, 2024b).
Ireland’s strong population growth adds to policy complexity. Ireland’s average urban population density grew by close to 250 inhabitants per square kilometre between 1990 and 2014, the second largest increase in the OECD (OECD, 2018). This was associated with the OECD’s third highest increase (2.4%) in the share of urban population living outside of urban centres and a marked rise in urban areas with multiple density peaks. Over broadly the same period, the area classified as urban grew at an average annual rate of 3.1%, more than twice the EU’s (Ahrens and Lyons, 2018). Furthermore, the share of urban land allocated to low population density areas, and its level of fragmentation, continued to expand over 1990-2014. Underpinned by strong population growth over the period (33% vs. 19% OECD average), in many Irish urban areas, suburbanisation coexisted with densification as in Spain, Sweden and the United Kingdom, which made effective urban planning more complicated. Similarly, land use efficiency is low in an international perspective (EEA, 2021). As Ireland’s population has grown by an additional 13% since 2015, i.e., three times as fast as in the OECD on average, and incentives to leave city centres recently strengthened, due to the combined effect of the COVID-19 pandemic and sustained house price inflation in dense areas, urban development conditions are unlikely to have improved. Hence, policies to rebalance the land-use mix via more functional and effective planning functions should be prioritised.
Patterns of suburban development associated with lower population density can have adverse effects, such as car-centric transportation systems (OECD, 2022e), weaker upward social mobility, and natural landscape degradation (Alberti et al., 2020). Urban sprawl is also related to higher air pollution (Bart, 2010), increased residential energy consumption and water shortages (Navuamel et al., 2018; Heidari et al., 2021). Moreover, if not met by an increase in urban density, population growth weighs on local authority finances (Kotchen and Schutle, 2009). Decentralised, discontinuous and scattered urban development thus challenges planners and policymakers (Shaw et al., 2020), requiring multi-dimensional planning approaches towards more compact and greener landscapes (Artmann et al., 2019).
Towards a more shared approach to planning policies
Significant public investment support has been put in place to boost compact growth. The NPF, coupled with the five-year ‘Our Rural Future’ national rural development policy (Government of Ireland, 2021b), set out a vision built on the interdependence between urban and rural areas to make towns a key engine of sustainable development and well-being. In this context, the multi-year Urban and Rural Regeneration and Development Funds (co-investment capacity of EUR 2.3 billion and EUR 1 billion, respectively) are funding competitive bids to rejuvenate larger cities/towns and rural towns/villages with less than 10 000 inhabitants (DHLGH, 2023e; Department of Rural and Community Development, 2024; Government of Ireland, 2021c). The user-friendly online trackers showing the stage of advancement and details of each project supported by the funds (DHLGH, 2024d; Department of Rural and Community Development, 2024) have improved transparency.
The large range of eligible urban intervention types, including building, refurbishment or demolition, active land management, infrastructure development, and brownfield adaptive re-use for a low-carbon transition, allows flexibility to address the heterogeneous features and challenges of towns. However, to address recurrent strategic weaknesses in land-use management across towns, authorities could prioritise specific subsets of redevelopment types in successive rounds of support. Developing an effective data architecture enabling timely comparisons across jurisdictions, as well as monitoring and assessment, could help identify best practices for replication by other towns or areas not covered by redevelopment schemes.
Specific support is earmarked to enhance decentralised institutional capacity. The Town Centre First (TCF) is a cross-government plan-based policy launched in 2022 to tackle vacancy and building redevelopment, while ensuring town centres are thriving places to live and work in (Government of Ireland, 2022a). The scheme, which already covers 52 selected towns with less than 10 000 inhabitants, provides eligible towns with funding to build town-level planning capacities. In this perspective, public support to local urban redevelopment policies is key, as redevelopment processes enable local authorities to reinforce themselves by testing their internal capacities and expand their knowledge by interacting with non-state actors and partners. Moreover, the acquired expertise will increase local authorities’ willingness to embrace new redevelopments, paving the way for self-replicating initiatives (Canelas and Noring, 2022).
TCF supports decentralised institutional build-up via town-level teams, representing local communities, stakeholders, and businesses, tasked to devise a multi-dimensional redevelopment plan of their town centre. As financial support, – for up to EUR 160 000 (EUR 210 000 in less developed North-West counties), is earmarked exclusively to the development of the programme’s multi-dimensional plan, upon its finalisation, local authorities have to competitively apply to available land development schemes to obtain the funding needed for its implementation. Even so, by prompting local actors and stakeholders to engage in an evidence-based coordinated policy approach, grounded on equally-weighted social, economic, and environmental considerations, the TCF scheme could be key in enabling more sustainable and attractive residential and mixed-use development within towns.
As lessons from the initial pilot towns emerge, the government is committed to establishing, via the National TCF office, a national TCF toolkit, which can enhance diffusion of best practices, to complement a dedicated web portal providing access to the scheme’s resources and reviewing all available funding programmes (Government of Ireland, 2022a). The toolkit will include evolving guidance on developing effective town-level plans. Practical, hands-on guidance will be needed to assist local communities in properly diagnosing key developmental issues related to climate, digitalisation, entrepreneurship, culture, and social aspects. Practical guidance should also be provided for gathering baseline data essential for the town appraisals that inform TCF plans. Albeit partly relying on a set of relevant official data sources, which should be linked in the online portal, smaller communities may find the required surveys and data collections (e.g., across retailers and consumers) burdensome.
The TCF’s cross-governmental, shared, and data-driven approach could become a reference model for national land development policy. The multi-stakeholder nature of the TCF plan, linked to a project anchored in NPF guidelines and led by a local authority or other public body, could constitute a model of shared planning capacity building. Towns not immediately eligible to the scheme but willing to pursue urban redevelopment initiatives according to its multi-dimensional approach – independently from their scale – should have full access to the portal and the toolkit resources. Tasking the national TCF Office with organising periodical workshops on tackling main procedural hurdles in bottom-up town regeneration projects could support further diffusion of best practices. Moreover, more developed data infrastructure could be built on the TCF’s digital architecture to expand its knowledge base via eased access to resources and information relevant for broader land development issues.
Building understanding to ensure more sustainable land-use management
Complementary reforms would enable further efficiency gains in land management. Ireland released its first national land cover map in 2022. According to the map, based on 2018 aerial and satellite imagery, artificial areas made up 3.8% of the national surface, which is somewhat below the 4.2% EU average, and were more concentrated in Eastern areas (Figure 4.13; Tailte Éireann – Surveying, 2022). However, there is currently no aggregated and standardised national data on land use, with existing data scattered across sources and often lacking detailed background information (Government of Ireland, 2023b). The government should engage with stakeholders and step up its efforts to establish a national land-use classification system. Such a system would accelerate the development of land-use maps, although the process will remain resource-intensive due to the need for high processing. Moreover, satellite imagery alone cannot capture multiple land uses within a single land cover type (e.g., residential and commercial uses in the same building), necessitating the implementation of sophisticated survey methods. The government’s commitment to delivering a national land-use map by 2027 is welcome. This process should also leverage available zoning data from local planning authorities to ensure that land-use map specifications enable the designing of integrated urban connections across lands used for residential, commercial, public service, recreational, or cultural purposes via active transport networks.
Per cent of the national surface, 2018
1. Other includes peatland, heath and bracken, exposed surfaces, and waterbodies (excluding marine water).
Source: Tailte Éireann – Surveying (2022), National Land Cover Map of Ireland 2018, Final Report.
Land prices are relatively high in Ireland and can account for a significant share of total development costs. While data on development land prices do not exist, as an indication the average price of one hectare of arable land was the EU’s fourth highest in 2022 (Eurostat, 2024). Even so, in a private development perspective, greenfield sites remain more profitable than brownfield alternatives, as land prices in suburban areas are relatively lower and construction in empty areas is technically easier and cheaper than refurbishing existing buildings or sites. Indeed, profit margins generated by a new two-bedroom apartment built in a brownfield site can be 5-8% percentage points lower than in greenfield settings (SCSI, 2021). Therefore, tighter brownfield development targets, though signalling strong policy commitment, may end up having limited traction among private investors. Policies to rebalance profitability across brown and greenfield development or encourage a cultural shift in preferences and housing choices (Scott and Faulkner, 2022), could be more effective (OECD, 2022e).
Greenfield development generally incurs higher overall costs. Suburban greenfield development can lead to increased public spending on climate mitigation and adaptation due to environmental impacts, such as habitat destruction, loss of green spaces, and increased runoff and flood risk (McGrane, 2016). Additionally, increased private traffic and longer commutes lead to higher road maintenance costs and greenhouse gas emissions (Chapter 3). More critically, the state will be involved in the establishment – often from scratch – of comprehensive water, electricity, sewage, and road networks, as well as in fostering key public services in the area (e.g., schools, hospital, public transport systems). In contrast, brownfield sites have lower infrastructure development costs, although they may face higher spending on remediation, in the case of contaminated sites. Lower co-participation rates for the costs of essential infrastructure deployment relative to greenfield development would encourage investment in brownfield or compact development. Strategic use of green spaces in landfill developments can enhance the attractiveness of compact and innovative urban housing, as proximity to green areas, especially if recreational, makes newly-developed residential units more marketable (McCord et al., 2014; ONS, 2019). Implementing a green point system to ensure sufficient green space, as successfully applied in Berlin, Malmö, and Southampton (Box 4.4), could be a viable solution.
In 2001, the city of Malmö, hit by the decline in the shipbuilding industry, introduced the Green Space Factors system (based on an equation assigning factors to environmental features according to their ecologic benefits) to regenerate its mostly abandoned and contaminated Bo01 neighbourhood by applying environmental concerns to urban planning. Developers were required to achieve a green space factor of 0.6, i.e., ensuring that 60% of the surface of new developments was covered by high-quality green space. Subsequently, a Green Points System, as a checklist for developers to provide for varied plant species and habitats, was also introduced. The municipal government co-designed a Quality Programme with developers and funded the bulk of the first developments. The land was ultimately sold, and the profit contributed to the municipal budget. Ex-post evaluations showed the initiative was successful in greening the area, while no clear impact on biodiversity could be found.
Source: City of Malmö, Green City; Interlace Hub, Urban Governance Atlas.
A clearer understanding of the brownfield potential would enhance investment certainty. The government should prioritise the mapping of available brownfield sites, a task that could be assigned to the Land Development Agency, in its remit to scope State lands to deliver affordable housing options in cities and larger towns. The exercise should build on detailed estimates of the overall redevelopment costs associated to each project, so that brownfield sites can be mapped by their profitability. This would ensure more effective resource allocation and decision-making, as the mapped information, combined with an assessment of the potential to create social value, would help channel available funding to where it is needed (OECD, 2022e). Better categorisation of brownfield sites would also enable quantifications of the extent by which brownfield development can absorb population growth, as well as how much of it will eventually need servicing through greenfield alternatives. In the latter case, adequate regulatory and funding resources will be needed to develop greenfield spaces in communities close to key economic and social activity centres. These will have to feature low-mobility demand and minimal environmental footprints, thanks to sustainable – specifically planned – modes of transport and the enhanced supply of innovative and compact housing solutions integrating green amenities.
Improving the functioning of the private rental sector
The Irish rental sector has been changing over time. Demand has been driven by population increases, new household formations, inward migration (40% of private rental sector tenants are non-Irish), holiday lets and the rise of industries that attract higher-income workers to urban centres. Affordability trends in the Irish rental sector tend to be different than in other European countries. Overall, 13.2% of Irish tenants renting at market price were overburdened by housing costs (over 40% of household disposable income) in 2022, well below the EU average of 21%. However, this partly reflects the steep increase in housing support to low-income households, while middle-income renters face affordability challenges, especially in Dublin.
A small rental sector can increase house price volatility (NESC, 2023) and may lower competitiveness as discussed above. Hence, policies to increase rental supply should be prioritised, especially by creating more certainty in the investment environment. In the last quarter of 2023, 36% of residential sale instructions to agents were landlords selling their investment property, with overly complex and restrictive rent legislation cited as the main factor (SCSI, 2024a). Aspects of regulation that were of most concern to small landlords in 2022 included ‘controls on rents’ (35%), ‘frequency of regulatory changes’ (34%) and ‘length of time for notices of termination’ (31%) (RTB, 2023).
More flexible rental market regulations, together with reforms to increase supply responsiveness, can make housing markets more efficient and affordable in the long-term. As stringent rent controls reduce the rates of return on real estate investment and create uncertainty, they can discourage developers and lenders from investing in real estate, making the supply of housing less responsive to changes in demand (OECD, 2021a). While they improve affordability in the near term for existing tenants, rent controls can reduce labour mobility, construction in new units and maintenance of existing units. Hence, it is important to weigh the expected benefits of strict rent regulations on existing tenants in the short term against possible longer-term drawbacks.
Ireland introduced rent controls in 2016, which limited rent increases to 4% per year in areas designated as Rent Pressure Zones. The cap was then linked to harmonised inflation in the summer of 2021 and to 2% per year or the harmonised inflation rate, whichever is lower, in late 2021. The controls seem to have had some rent stabilisation effects (O’Toole, 2023; Coffey et al., 2022), but lack of data makes it difficult to measure the potential impact on supply, although some stakeholders cite it as a main barrier (Department of Finance, 2024). Furthermore, with higher-than-normal inflation in recent years, the cap is likely below the cost of maintenance and upkeep of property (O’Toole, 2023), and might have driven landlords to sell. Continued population growth, including inward migration, will raise demand for rental accommodation in big cities, increasing the need to maintain incentives to have an adequate supply of private rentals. A recent government study of the private rental market has recommended a detailed review of the rent control measures (DHLGH, 2024a).
One option to provide tenants with reasonable security over tenure and rent levels is a system of rent stabilisation, whereby rents can be freely adjusted for new contracts (between tenancies), but regulated during the duration of the contract (OECD, 2021a). Hence, Ireland should allow rents to be re-set between tenancies and adjusted for inflation during a residency, but care should be taken that it does not lead to unfair termination of contracts (see below). The current system also has some exemptions related to a property that has not been rented for a period of two years prior to the immediate tenancy commencement date and a property that has undergone a ‘substantial change in the nature of the accommodation’, such as increased floor area by at least 25% and improved energy efficiency (improvement of seven ratings). Such exemptions are welcome as they can counteract potential negative impact of disincentives for maintenance and upgrades, especially given Ireland’s targets of reduction of carbon emissions from buildings. Their impact should be monitored and adjusted, as needed.
At the same time, keeping the balance of the rights of tenants and landlords is essential. The rights of tenants, which were among the lowest in the OECD in 2021 (OECD, 2021a), have improved over time through reforms to registration systems and dispute mechanisms, increased notification periods for termination and better regulation of physical standards (DHLGH, 2023a). Most notably, minimum notice periods for termination have risen to 90 days for tenancies under six months. The reasons for terminating a tenancy after six months, which include failure to comply with the obligations of the tenancy, sale of property, occupancy by landlord or family member or refurbishment, are similar to other OECD countries. However, landlords can terminate tenancies of less than six months without a reason, which combined with the proposed reforms to rent controls, could lead to unfair terminations. Hence, ensuring that the Rental Tenancies Board and local authorities, the primary regulators of the rental sectors, have sufficient funding and enforcement powers, is key (Housing Commission, 2024).
Reducing the complexity and frequency of changes to rent legislation can also help. The Residential Tenancies Act 2004 regulates the landlord-tenant relationship, covering private rental, cost rental, social rental by approved housing bodies and student-specific rental accommodation, and sets out the rights and obligations of landlords and tenants. There have been several changes to rent controls since 2016, a change in notice periods and processes for termination (see above) and moratoriums on evictions in extraordinary times. While some have improved the conditions for some tenants, the frequent changes have been reflected with many amendments to the Residential Tenancies Act 2004, making it complex and hard to navigate for both tenants and landlords (Housing Commission, 2024). An audit of the administrative burden on rental regulation, followed by a review and consolidation of the Residential Tenancies Act, including its amendments, could improve the effectiveness of regulation of the private market sector.
Addressing bottlenecks and inefficiencies in the construction sector
Reducing labour shortages
Availability of skilled staff is the most commonly cited barrier to investment in the construction sector and higher than the EU average (EIB, 2024), reflecting rising demand from infrastructure investment, including housing, and a backlog of reduced apprenticeships in the aftermath of the global financial crisis. There are also some signs of skill mismatches, with declining employment despite high wage growth in the construction sector. Around 50 000 additional workers will be needed in the construction sector from 2023 to 2030 to meet the housing and retrofitting targets (DFHERIS, 2022). The ability to issue working permits has been expanded to almost all roles in the construction sector, and 1 474 were issued in 2022, up from 608 in 2021. While permits will help boost labour supply and key skills in the short term, they can also add pressure on the housing market (NCPC, 2024b). Hence, efforts to increase the domestic workforce in construction through apprenticeships (Chapter 2) and increasing productivity and standardisation in the sector (below) should also be continued. The recent declines in the demand for commercial real estate (Chapter 1) is also likely to free up some labour that could be allocated to residential housing sector. Supporting such a transition can help address some short-term bottlenecks.
Lowering costs and raising productivity in the construction sector
High construction costs can be a barrier to the cost-effective implementation of planned spending increases on housing, delivery of compact urban growth (see above) and viability, i.e. producing housing units at sale or rental prices consistent with costs of production and household incomes (Figure 4.14). Addressing viability challenges requires a good understanding of costs, which can be difficult to compare internationally (Arigoni, Kennedy and Killian, 2022). Nevertheless, several reports have found that construction costs are 15-30% higher in Dublin than in other European cities (DHLGH, 2023f; SCSI, 2024b and 2023a). In a context of rising demand and projected increases in the share of one-two person households, the construction costs of apartments should be lowered, as only the top sixth of the income distribution can afford a newly-built rental apartment (Lyons, 2021). Given high public spending on housing, improving viability would also boost public spending efficiency.
Aggregate cost measures do not capture the cost increases associated with regulatory changes, such as increased minimum sizes and energy efficiency requirements, lack of planning uncertainty and costs of infrastructure provision (Lyons, 2015; Housing Commission, 2024; Disch et al., 2024). Audits of construction costs should be continued, with a view to improve the evidence base of construction costs and develop targets for cost reductions, as in Germany (Box 4.5). Publishing extensive costings data, including the development and use of standardised measures of cost over time that consider soft costs, will be key. In addition, there is scope to ease regulations with respect to size and specification of units. For example, it is common for apartments for sale or rent in other comparable cities to have bare ceilings, no floor finish or fitted wardrobes, to have shared bathrooms/no ensuites, which lower the costs compared to Dublin (DHLGH, 2023f).
The development of standardised house and apartment types to reduce costs and support viability is key. The recommendations of the 2023 Residential Construction Cost Study (DHLGH, 2023f) should be implemented, as a priority. These include: i) undertake a similar cost study at regular intervals, using the methodology developed; ii) review certain standards around apartment fittings and finishes; iii) improve design and cost efficiency to increase standardisation and productivity of the construction sector. Hence, the recent assessment of total development costs for different types of housing is welcome (DHLGH, 2024e). Establishing a collaborative forum for the refinement of existing housing types, updating the technical guidance that accompanies the building regulations regularly to facilitate alternative construction methods, as recommended by the Housing Commission, should also be considered. Reviewing and configuring housing design standards to better reflect changing life-stage requirements and making design standards subject to rigorous checks before implementation would also help.
Note: Panel A: 1. For building and construction materials. 2. For building and construction (i.e. materials and wages). Panel B: Average cost of direct construction costs per m2 for 11 building types.
Source: Central Statistics Office; and Turner and Townsend, Global Construction Cost Performance.
To address rising construction costs in Germany, the 2015 Construction Cost Reduction Commission developed 71 recommendations for the federal, regional and municipal governments, housing and construction industries, planners, researchers and others. Recommendations for policy-makers included: i) conducting a mandatory impact assessment of housing costs for all drafts of laws, regulations and standards; ii) harmonising existing building regulations, approvals and quality requirements, for instance by adopting model building regulations, iii) improving the evidence base of construction costs, drawing on completed construction projects, observation of cost influencing factors, contribution of innovative manufacturing processes; iv) setting minimum and uniform standards for social housing; and v) defining quality standards for simplification and rationalisation. The recommendations were followed up by setting up a special office to support implementation and the strengthening of standardisation and an expanding share of modular building. The increase in construction costs has been slightly lower in Germany than the EU average since 2015.
Source: OECD (2020a), Policy Actions for Affordable Housing in Latvia; and Bundesministerium für Wohnen, Stadtentwicklung und Bauwesen (2019), Limiting Construction Costs.
Comparatively low productivity in the construction sector (Figure 4.15) has been linked to lack of standardisation and scale due to fragmentation, with a high dependency on subcontractors (KPMG, 2020; Goodbody, 2024b). Ireland has been implementing its roadmap for increased adoption of modern methods of construction (MMC) via reforms to procurement processes, regulation and standards, financing, skills development and capacity of industry (DETE and DHLGH, 2023). Almost 1 800 social homes utilising MMC commenced construction in 2024 and the first phase of a new MMC Demonstration Park is under progress (Government of Ireland, 2024b). The Build Digital Project brings different stakeholders together to support the digital transformation of the construction sector (Government of Ireland, 2022b).
Gross value added per hour worked, construction sector, 2023
Source: Eurostat, National Accounts.
The main barriers to the widespread adoption of new technologies in the construction sector are lack of skilled labour, time and training costs, and uncertainty of MMC demand (EC, 2021; SCSI, 2023b; EY2021). Coordination between policymakers and industry and reskilling of the labour force will be needed, as was the case in Sweden and Germany (Oti-Sarpong and Shojaei, 2022). Following a recent assessment of skills needs for MMC, an action plan is being prepared to implement the recommendations, which should be prioritised. These should include developing more dedicated apprenticeships for MMC. It will also be key to ensure that smaller firms, who face difficulties in accessing supply chains, are able to switch to MMC, which could require innovative financing arrangements (NESC, 2024).
The small-scale nature of many construction projects and a large number of different housing designs prevent economies of scale (IBEC, 2021; Reddy, 2020; Sweeney, 2024). Setting mandated targets to allow a minimum of public sector new builds to be built through low-carbon building technologies, as in the United Kingdom, can provide incentives to scale up. The 2022 national guidelines provide a wide range of around 50 types of standardised designs. Local authorities and other agencies seeking state funding for social housing schemes are required to utilise one of these designs or explain when they do not comply. Full implementation is needed to ensure that the planned increases in social housing supply helps drive rapid standardisation. The public sector, which has a large and expanding role in the housing market, could leverage its purchasing power to lower costs and boost supply. For example, the state could lower the specifications on state-built housing, lower the price caps on units that benefit from subsidisation schemes and/or change the preferred typologies of such housing. The Land Development Agency, which will have a large role to play in the near term, can help drive this change. Increasing the targets and funding for new public housing using MMC under an expanded Social Housing Accelerated Delivery Programme and setting more binding targets around reduced carbon footprints could be considered (NESC, 2024).
Improving the efficiency and sustainability of social and affordable housing
The provision of social housing is above the OECD average, but well below that in Austria, Denmark and the Netherlands (Figure 4.16, Panel A; OECD, 2020b). Nevertheless, the share of households in need of social housing or subsidised private rentals has tripled since the 1990s, leading to long waiting lists, an over-reliance on short-term rent supplement solutions and a steep increase in homelessness. The share of households on the waiting list for over seven years declined from 22.3% in 2022 to 21.5% in 2023. Needs are highest for certain areas and household types (Housing Agency, 2023). Those living in the four Dublin authorities (41.6% of the total), and one-adult and one-parent households are the main groups needing social housing, and the share of those needing social housing due to homelessness increased from 11.6% in 2022 to 13.5% in 2023. In addition, those receiving housing assistance payments are removed from waiting lists for social housing even though the tenancy is not as secure as direct provision of social housing (Housing Europe, 2023), likely understating waiting lists. Hence, it is welcome that one of the pillars of Housing for All is eradicating homelessness, increasing social housing delivery and supporting social inclusion (Box 4.1).
Note: See Indicator PH4.2.1 in Public policies towards affordable housing - OECD for detailed information.
Source: OECD Affordable Housing database; and Department of Housing, Local Government and Heritage.
Delivery of social housing including through public-private partnerships is on the rise (DHLGH, 2024f). The Land Development Agency, the body responsible for coordinating the use of state land for housing, is mandated to provide 12 900 social, affordable, and cost rental homes between 2024 and 2028 (Government of Ireland, 2024d). This focus is welcome as around one fifth of the 83 recommendations of the Housing Commission are related to social housing, including to raise the share of social housing and cost-rental to 20%. In this context, it will be important to ensure the long-term financial sustainability of the system. The cost of housing those with an “ongoing unmet housing need” increased from EUR 29 billion 2020 to EUR 35 billion in 2022 (Parliamentary Budget Office, 2024).
Rising costs partly reflect the shift from direct provision of support to indirect subsidisation of housing costs in the private rental sector through the rental accommodation scheme, the rent supplement and housing assistance payments (HAP) (Table 4.3). The number of households receiving HAP rose steeply from 485 in 2014 to 61 907 in 2021, though it has declined by 8% since then (Figure 4.16, Panel B). The share of indirect support accounts for one-third of the total, compared to one-fifth in the early 1990s (Doolan, Roantree and Slaymaker, 2022). This is reflected in the high share of social rental housing provided by for-profit and individual providers (Panel C) and rising costs, with annual expenditure on HAP more than tripling between 2017 and 2020, despite the freeze of income and rent limits in recent years.
Note: Approved housing bodies are independent, not-for-profit organisations providing affordable rented housing for people who cannot afford to pay private sector rents or buy their own homes.
Source: Doolan, M., B. Roantree and R. Slaymaker (2022), “Low income renters and housing supports”, ESRI Research Series, No. 141; and Department of Housing, Local Government and Heritage.
While supported tenants in the private rental sector can have greater choice of accommodation and location, they are more directly affected by developments in the private rental market in terms of availability and affordability and have less secure tenure, in contrast to those in properties owned by local authority or approved housing bodies (AHB). Housing allowances can be more flexible in terms of targeting and provision and are less likely to create mobility barriers than social housing (OECD, 2020b). However, in the case of an inelastic housing supply, housing allowances can drive up rental prices and are ultimately passed along to landlords in some cases, rather than to households in need (Salvi del Pero et al., 2016).
In international perspective, rent allowances in Ireland are generous and reach a high number of households, including those in the third quintile of the income distribution (Figure 4.17). As in some other OECD countries, Ireland has a “missing middle” among renting households. Estimates suggest that around 56% of renting households in the Greater Dublin area are not eligible for social housing, but cannot afford rents (Lyons, 2021). In addition, while the primary beneficiaries of housing supports are low-income households, one-fifth of supported renters are in the top half of the income distribution (Corrigan et al., 2019). Hence, the housing allowance system, including the rising dependency on the already-stretched private rental market, should be reassessed with a view to lowering their use as a long-term solution.
Note: See indicators PH3.3.3 and 3.3.1 in Public policies towards affordable housing - OECD for detailed information for Panels A and B, respectively.
Source: OECD Affordable Housing Database.
In the short term, given the rising dependence on housing allowances, a reform of the differential rent scheme, as committed to in Housing for All, should be pursued. Currently, the amount of rent contributed by tenants is linked to household income and composition and is unrelated to the cost of providing or maintaining accommodation. However, each local authority has its own rules, with a large variation in terms of calculations (assessable incomes, contribution rates, thresholds). Local authority tenants in different areas on similar incomes do not pay the same rents, even when renting properties with the same market value (Commission on Taxation and Welfare, 2022), often with lower rents in Dublin. A reform towards a national system could improve the currently weak incentives for local authorities to invest in the direct provision of social housing since rental income tends to fall below management and maintenance costs. For example, capping rents at the cost of provision, while removing supplementary caps on the contribution of subsidiary earners, could enable local authorities to raise additional rental income from their higher-income-tenants (Doolan, Roantree and Slaymaker, 2022). Together with cost-rental (see below), such a reform can reduce the degree of rental market segmentation.
In the long run, moving away from housing allowances requires a higher supply of social and cost-rental housing. Housing for All introduced cost rental, where rents are set to cover only the cost of financing, managing and maintaining the homes, which aims to improve affordability and tenure security for middle-income households (net annual income of less than EUR 59 000 and nationwide and EUR 66 000 in Dublin). The target is 18 000 units by 2030, with around 2 200 already delivered by the second quarter of 2024. This model can help improve the long-term financial sustainability of the system, if the homes continue to be offered at affordable rents in perpetuity and future profits are ringfenced for the development of new social and affordable housing (Housing Europe, 2023).
Irish social housing is more expensive than that in Austria and Denmark due to its different funding model and its failure to retain and recycle the value of historic public subsidies (Norris, 2020). The current funding model, which mainly depends on central government grants and loans to local authorities and AHBs, can be procyclical and volatile as in the post-GFC period. In addition, the value of past investment has leaked out of the social housing system as around two-thirds of all publicly financed housing built since the 1930s have been sold to tenants at 40-60% discounts from market values (Norris and Bryne, 2020). The current system of leasing arrangements with private landlords and the HAP scheme also increases leakages from the system. In contrast, other countries, where public authorities have held onto social rental housing, rather than privatising them by selling them to tenants at below market prices, have developed revolving financing mechanisms, where rents from older parts of their stock can act as capital for new investment (Box 4.6). This reduces the long-term need for ongoing public capital investment for housing development (Housing Europe, 2021). Austria and Denmark also utilise housing bonds to attract private capital for investment in affordable housing (OECD, 2023a).
In Austria, revolving funds support the development and maintenance of the social housing stock. Approximately 30% of a typical project is financed through public loans (0.5-1% interest rate and 30- 45-year maturity), and the remaining via bank mortgage loans (with interest rates below other commercial finance) and equity contributions from housing associations. The Limited-Profit Housing Act sets out the key governance principles for housing associations, including a limitation of nominal capital paid out to shareholders of 3.5%, a calculation of prices based on actual costs, a continuous reinvestment of capital and a regular audit of the efficient use of resources and the compliance with the Limited-Profit Housing Act. The business model of housing associations is based on cost-recovery and a continuous re-investment of any surpluses into new construction or renovation. This means that a housing association is legally required to charge the cost it takes to build and maintain a house. Any surpluses generated are strictly regulated.
Denmark’s National Building Fund is an independent institution outside the state budget. Funding is based on a share of tenants’ rents (amounting to 2.8% annually of the total acquisition cost of the property), in addition to housing associations’ contributions to mortgage loans (approximately 2% of the property acquisition cost). Payments are adjusted annually for the first 20 years after loan take-up, and then by a slightly lower rate until the 45th year, at which point rents are maintained at the reached nominal level. A share of tenants’ rent is used to pay off the housing agency’s mortgage loan for the first approximately 30 years, at which point the share is allocated to the state for another ten years. Once this period is over, the share is allocated to the National Building Fund. Approximately one-third of the Fund’s resources are used to support the construction of new social housing. In this way, each housing organisation contributes to and can borrow from the Fund, which supports a wide range of activities, including renovation work in the existing housing stock.
Source: OECD (2020b), “Social housing: A key part of past and future housing policy”, Employment, Labour and Social Affairs Policy Briefs.
Any proposed reform of the model should ensure that it is underpinned by legislation, regulations and an appropriate governance structure. For example, the Housing Commission recommends: i) introducing new sources of debt finance (e.g. through the European Investment Bank); ii) expanding the remit of the Housing Finance Agency to act as a debt placement agency to manage access to funding by raising the required finance, conducting credit assessments, allocating the finance among borrowers, and organising repayment; iii) improving transparency by publishing details on the costs of delivery by different organisations and funding mechanisms (as in Denmark, where the Housing Fund has set up an extensive database); and iv) establishing, through legislation, a revolving fund capitalised by central exchequer funding. The latter could part-fund government loans for social housing provision, refurbishment and upgrading, which, following their repayment using income from housing rents, could be ‘revolved’, i.e. lent out again. The use of this fund must be appropriately regulated and restricted to social and cost-rental housing provision, refurbishment and upgrading and could be managed by the Housing Finance Agency.
Addressing rising numbers of people experiencing homelessness
Reduced housing affordability in the wake of the COVID-19 pandemic, driven by strong population and house price growth coupled with surging costs of living, triggered a marked increase in Ireland’s homelessness rate, relative to the pre-pandemic period (Figure 4.4, Panel C). A record of over 15 199 individuals had registered for emergency accommodation as of November 2024 (DHLGH, 2024g), 31% of whom were children. This is equivalent to around 29 persons experiencing homelessness per 10 000 population, the fourth highest rate among the 22 OECD countries with available data, although based on differing national definitions (OECD, 2023b), and does not include data on persons experiencing street homelessness, which are collected by local authorities. Close to two-thirds of adult homeless individuals avail of private emergency accommodation, including hotels, B&Bs and other residential facilities, which is more costly than state-run housing alternatives (RTÊ, 2024). In addition, homelessness appears to be geographically concentrated, with about 71% of adults’ access to emergency and temporary accommodation occurring in the Dublin region and the rest being mostly concentrated in other main cities (DHLGH, 2024h).
Increased delivery of social housing gave local authorities some leeway in ensuring more secure and permanent housing solutions to people experiencing homelessness and at-risk individuals or households. Hence, in September 2024, both preventions and exits from homelessness – via the creation of new tenancies for adults – were up strongly in annual terms. More importantly, rising exits from emergency accommodation through local authority and AHB lettings significantly reduced reliance on private rentals. Nevertheless, homelessness continued to increase (DHLGH, 2024g). More streamlined social housing allocation processes and improved portability of rights to facilitate labour mobility, together with enhanced and more consistent rules for prioritising people experiencing homelessness across local authorities, are needed. Delays in allocating social housing for people who are exiting homelessness can easily derail their transition towards more secure accommodation (Housing Commission, 2024). Fostering the provision of appropriately-sized social housing could also help. With single adults and parents accounting for, respectively, 66% and 58% of all homeless adults and families (DHLGH, 2024h), boosting the supply of one- and two-bedroom social housing units, of which there is a shortage (Housing Commission, 2024), could improve access to proper housing for the most disadvantaged.
Albeit mostly driven by family breakdowns and evictions from private rentals, homelessness in Ireland is often also associated with mental health, substance, or relationship abuse issues. In addition, poor transitions to autonomous housing of immigrants from outside the European Economic Area (including recognised refugees), whose number has grown to make up 26% of all residents in emergency accommodation as of November 2024 (DHLGH, 2024h), limit the local authorities’ capacity to accommodate new applicants. Effectively addressing such multi-faceted social needs requires significant cross-government policy coordination (OECD, 2023c). This is well acknowledged within the Housing for All Plan but not yet fully reflected on the implementation side (Housing Commission, 2024). For instance, the effectiveness of Housing First, the flagship programme providing multi-dimensional support to long-term homeless individuals with complex and chronic needs, following their move to permanent housing, is constrained by a lack of dedicated funding for healthcare assistance. Ensuring earmarked, multi-year funding from the Health Service Executive could significantly improve the programme’s service quality, via enhanced certainty and better long-term planning. Multi-year funding should also be made available to the Youth Homelessness Strategy, which could enable a shift towards more ambitious targets. Expanding the provision of integrated housing-related social work services, currently available mainly in the Dublin area (Housing Commission, 2024), would improve the effectiveness of case management via a better understanding of underlying social and housing needs.
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